Nikolaidis v Legal Services Commissioner and Anor

Supreme Court of NSW|2007-12-19|Before: Hoeben J, Mr Raymond J

CITATION : Nikolaidis v Legal Services Commissioner and Anor [2007] NSWSC 1491

DECISION : Stay granted on undertakings to be given by the legal practitioner.

CATCHWORDS : LEGAL PRACTITIONERS - cancellation and suspension of practising certificate - application by solicitor for stay of cancellation of practising certificate - balancing exercise - protection of public paramount - whether fruits of successful appeal would be lost if stay not granted.

Alexander v Cambridge Credit Corp Limited (1985) 2 NSWLR 685 CASES CITED : Cahill v The Law Society of NSW (NSWCA 17 December 1987) NSW Bar Association v Stevens [2003] NSWCA 95 Robb and Rees v Law Society of the Australian Capital Territory (1996) 72 FCR 225

Leon Nikolaidis - Plaintiff PARTIES : Legal Services Commissioner - First Defendant Council of the Law Society of New South Wales - Second Defendant

Mr G C Lindsay SC - Plaintiff COUNSEL : Mr N Beaumont - First Defendant Mr R R Stitt QC - Second Defendant

Horowitz & Bilinsky - Plaintiff SOLICITORS : Ms Lynda Muston, Office of the Legal Services Commissioner - First Defendant Mr Raymond J Collins, Law Society of New South Wales - Second Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

16184/2007 - Leon Nikolaidis v Legal Services Commissioner & Anor

JUDGMENT 1 HIS HONOUR: Nature of Proceedings This application was brought before the Court on an urgent basis during the vacation. Accordingly, the reasons for decision are not as full as would normally occur. 2 Leave was granted to the plaintiff to proceed on an Amended Summons. 3 The orders sought in that Summons were as follows:

(1) An order (pursuant to s 549 of the Legal Profession Act 2004) that the decision made by the second defendant on 27 November 2007 to suspend the practising certificate of the plaintiff be set aside.

(1A) An order (pursuant to s 108 of the Legal Profession Act 2004) that the decision made by the second defendant on 13 December 2007 purporting to cancel the practising certificate of the plaintiff be set aside.

(1B) An order (pursuant to s 62(3) of the Legal Profession Act 2004) that any cancellation of the practising certificate of the plaintiff pursuant to s 61 of the Act be stayed until his appeal against conviction on 22 August 2007 of an offence under s 300(1) of the Crimes Act 1900 (NSW) is finally decided, lapses or otherwise ends or until further order of the Court.

(2) An order pursuant to s 108 or s 549 of the Legal Profession Act 2004 that the defendants issue the plaintiff with a local practising certificate until further order of the Court. 4 The urgent application before the Court on 19 December was that the cancellation of the plaintiff's practising certificate effected by the resolution of the second defendant on 13 December 2007 be stayed and that any suspension of his practising certificate effected by the resolution of the second defendant on 27 November 2007 also be stayed. In that regard the plaintiff relied upon s 62(3), 108 and 549 of the Act and the inherent power of the Court. The stay was to continue until the plaintiff's appeal to the Court of Criminal Appeal was decided, lapsed or otherwise determined.

Factual background 5 The plaintiff is a solicitor of the Supreme Court of NSW having been admitted on 17 December 1980. He practised as a solicitor continuously from that date with the firm MD Nikolaidis & Co, a law firm established by his father in 1947. As of 2007 the plaintiff was managing that firm as a sole trader. 6 On 19 August 2002 the plaintiff was charged with a single offence under s 300(1) of the Crimes Act 1900. The charge read: "That Leon Nikolaidis between 31 October 1996 and 17 February 1998 at Sydney in the State of NSW did make a false instrument namely a letter addressed to John Preston dated 19 April 1984 with the intention of using it namely to induce another person to accept the instrument as genuine and because of that acceptance do some act to the prejudice of John Preston." 7 The hearing of that charge took a somewhat unusual course. It was listed for trial on four occasions. On the first occasion the matter did not proceed because the Crown wished to issue further subpoenas. In the second trial, the jury having been reduced to eleven, was unable to reach a verdict and was discharged. The third trial took place in February 2006 and once again the jury was unable to reach a verdict and was discharged. At the conclusion of the fourth trial on 22 August 2007 the plaintiff was found guilty by a jury of the offence. 8 The matter came before Judge BJ Knox SC for sentence on 23 November 2007. His Honour sentenced the plaintiff to a non-parole period of 12 months commencing 23 November 2007 and expiring 22 November 2008 with a balance of term of 12 months expiring 22 November 2009. The applicant appealed against his conviction to the Court of Criminal Appeal and that appeal has been fixed for hearing on 12 March 2008. 9 The applicant successfully applied for bail on 26 November 2007 pending his appeal. I was the Judge who granted bail. The detailed reasons are set out in my judgment of 27 November 2007. One of the reasons for granting bail was that I concluded in accordance with R v Wilson (1994) 34 NSWLR 1 that the grounds of appeal upon which the plaintiff relied raised something more than an arguable point and that there were reasonable prospects of success. In that regard I referred to grounds of appeal 1 and 4:-

Ground 1 - Substantial miscarriage of justice was occasioned by the failure of the trial judge to give proper or adequate instruction regarding the nature and scope of s 300(1) of the Crimes Act 1900.

Ground 4 - The appellant seeks leave to rely upon what it said to be "fresh evidence". The appellant asserts that, had this evidence been before the jury, it is likely to have caused the jury to have entertained a reasonable doubt about the guilt of the appellant. 10 In order to understand the respective submissions of the parties in this matter, it is necessary to say something about the conduct which gave rise to the charge and which the jury must have found proved. 11 The principal evidence against the plaintiff was that of a Ms Moffatt, a former employee of the firm, who alleged that the plaintiff had directed her to prepare the false instrument. The instrument concerned was a carbon copy of a letter purporting to have been sent by the plaintiff to a client, John Preston, dated 19 April 1984. The letter purported to set out hourly charge out rates which would be used by the firm when providing legal services to Mr Preston. The letter was intended to be used in a dispute between the plaintiff and Mr Preston relating to a claim for unpaid fees by the plaintiff against Mr Preston. That claim was proceeding before a Supreme Court Costs Assessor at the time when the false instrument came into existence. One of the issues in dispute between the plaintiff and Mr Preston was the correct hourly rate to be used in the calculation of the disputed fees. 12 Between 22 August and 23 November when sentence was passed, the plaintiff was at liberty on bail even though the trial judge made it clear that a custodial sentence was likely. On 22 November the plaintiff entered into an agreement with another solicitor, Mr Zwar, to sell the firm and its business subject to a condition that if the plaintiff was successful in his appeal he could buy it back (exhibit C). The agreement seems to assume some input by the plaintiff in the conduct of the business, although the overall control would be in the hands of Mr Zwar. 13 On 27 November 2007 the Council of the Law Society issued a notice pursuant to s 548 of the Act immediately suspending the local practising certificate of the plaintiff. The document headed "Information Notice" provided two reasons for the decision. Firstly the direction from the Legal Services Commissioner and secondly the decision by the Council relying on the seriousness of the conduct for which the plaintiff had been convicted and received a sentence of a term of imprisonment. 14 The defendants had become aware of the conduct which provided the basis for the s 548 notice before 3 March 2000. On that date Robert Hawthorn, a retired solicitor, was appointed under s 55 of the Act to investigate the plaintiff's affairs. This investigation related to the same factual material which was the subject of the charge for which the plaintiff was convicted. 15 On 13 September 2006 the second defendant commenced proceedings in the Administrative Appeals Tribunal. Those proceedings included as a ground for the application, allegations of conduct which formed the basis of the offence for which the plaintiff was convicted. Those proceedings were adjourned pending the outcome of the criminal trial. 16 On 13 December 2007 the plaintiff was given notices under ss 61(4) and 61(5) of the Act and advised that his practising certificate had been cancelled. 17 Mr Zwar swore an affidavit and gave evidence in the proceedings. He accepted that he had a good understanding of the business conducted by the firm and that he would not have agreed to purchase the firm unless he had such an understanding. He said that although he expected that he might have the assistance of the plaintiff, he did understand that the plaintiff might remain in custody and that he would have to conduct the business of the firm without the assistance of the plaintiff. 18 Although I accept that Mr Zwar did have a reasonable understanding of the business of the firm when he agreed to purchase it, he clearly did not have the detailed understanding that the plaintiff had. In his evidence Mr Zwar referred to two particularly complex matters which the firm was conducting, both involving significant pieces of litigation. One matter comprised hundreds of folders. I accept that Mr Zwar would not have detailed knowledge of these matters. I also accept that the plaintiff would have intimate knowledge and certainly much greater knowledge about the business of the firm than Mr Zwar.

Submissions and consideration 19 The principles applicable to a stay application such as this were helpfully set out in Cahill v The Law Society of NSW (NSWCA 17 December 1987). Kirby P said: "In many early cases, and in other decisions in jurisdictions dealing with other issues under different Rules and with different approaches, it has been said that, to justify the grant of a stay, an applicant must establish the existence of exceptional circumstances which would warrant a departure from the general rule that the judgment appealed from is taken to be correct and should thus normally operate until set aside … Stays are nowadays more readily granted in this Court. Cases in which they are ordered include cases where serious harm would otherwise be caused in the event that the appeal is successful and the order, the subject of the stay application, is set aside on appeal. Appeal is now a regular and normal procedure which is very common in this State. Where brought as of right, it will often be appropriate to preserve the subject matter of the appeal in order to protect the utility of the appeal. In these circumstances it will frequently be appropriate to preserve the status quo ante pending the decision on appeal. … In cases of this kind, the overriding requirement to which the Court must give effect is the protection of the public. The Court's duty is to ensure that a person is not held out to the public as a member of the legal profession whose conduct does not meet the very high standards required of legal practitioners. As has often been said, the Court's function is not disciplinary as such. It is in this sense that its purpose is protective of the public. … The primary question for this Court remains whether, if a stay were granted, the public would be adequately protected pending the disposal of the appeal. Provided such a stay was subject to certain conditions being met I believe that it would. Not to grant a stay in the circumstances would cause irreparable damage to the claimant before the final orders were made in the appeal which he brings as of right. To grant a stay on the basis of a suspension of the right to practise would have a similar effect, although not, it is true, with the full disgrace of his being struck off the role. While these are secondary considerations to the protection of the public, they are matters which may be considered in a stay application provided that the public will be adequately protected by the order ultimately made." 20 Further assistance has been provided by the Court of Appeal in NSW Bar Association v Stevens [2003] NSWCA 95. In that matter Spigelman CJ reviewed the case law and the principles to be elicited from it. "[87] This general approach is confirmed in the joint judgment of this Court in Alexander v Cambridge Credit Corp Limited (1985) 2 NSWLR 685, a judgment in which this Court rejected the former approach to the grant of stays pending appeal to the effect that "special" or "exceptional" circumstances had to be established before the discretion to grant a stay pending appeal would be exercised. The Court said at p694: "In our opinion it is not necessary for the grant that special or exceptional circumstances should be made out. It is sufficient that the applicant for the stay demonstrates a reasonable or appropriate case to warrant the exercise of discretion in his favour." [88] The Court went on to note a number of relevant principles: · The onus is upon the applicant to demonstrate a proper basis for a stay that will be fair to all parties. · In the exercise of its discretion, the Court will weigh considerations such as the balance of convenience and the competing rights of the parties before it. · Where there is a risk that the appeal will prove abortive if the appellant succeeds and the stay is not granted, Courts will normally exercise their discretion in favour of granting a stay. · Where it is apparent that unless a stay is granted an appeal will be rendered nugatory, this will be a substantial factor in favour of the grant of a stay. · Although Courts approaching applications for a stay will not generally speculate about the appellant's prospects of success … this does not prevent them considering the specific terms of a stay that will be appropriate fairly to adjust the interest of the parties from making some preliminary assessment about whether the appellant has an arguable case." 21 In relation to cases of this kind involving professional persons, his Honour said: "[91] The relevant authorities indicate that the protection of the public is a matter entitled to significant weight on an application for a stay once it appears that a professional person has acted improperly to a substantial agree." 22 His Honour quoted with approval the following analysis by Finn J in Robb and Rees v Law Society of the Australian Capital Territory (1996) 72 FCR 225: "[101] … It is a case whenever an order for suspension is made and an appeal is lodged on arguable grounds, that the practitioner affected can assert that prejudice will be suffered if, the suspension having begun to run, the appeal is successful. This circumstance could not in my view justify, in effect, a stay as of right in all circumstances. The decision to stay a suspension order subject to appeal on arguable grounds must in my view involve an instance specific question. There is a variety of factors which account can or should properly be taken when considering a stay in such cases. Among these are (i) the seriousness of the misconduct found; (ii) the likely prejudice to public confidence both in the integrity of the disciplinary processes themselves and in the reputation of the profession if the practitioner is granted a stay; (iii) the means available to mitigate the prejudice alleged; and (iv) the expedition with which the appeal can be heard." 23 In favour of the application senior counsel for the plaintiff submitted that the public interest dictated that the plaintiff should be entitled to continue to practise as a solicitor upon terms pending the final determination of his appeal. Particular reference was made to the clients of the firm. This submission has force. Even if Mr Zwar were to continue to conduct the business of the firm, it is quite clear from the nature of the work which the firm conducts that many clients will be disadvantaged by the simple fact that Mr Zwar lacks the intimate knowledge of their matters that the plaintiff has. 24 It seems that in preparing the sale agreement, the plaintiff and Mr Zwar were unaware of the provisions of s 17 of the Act. It is common ground that if the plaintiff does not have a practising certificate the provisions of s 17 would prevent him from having anything to do with the firm at all. He could not attend the premises. Section 17 in effect renders the sale agreement ineffective since that agreement envisages a continuing role, albeit a subordinate one, for the plaintiff. Whether the agreement can be changed so as to protect the clients of the firm is not clear. There is accordingly force in the plaintiff's submission that if his practising certificate remains cancelled, there is a risk that Mr Zwar will not be able to take over the running of the firm. In that circumstance there would be a real risk of the firm ceasing to exist. Not only would that involve significant financial loss to the plaintiff but more importantly a potentially serious disadvantage to the clients of the firm. 25 The plaintiff referred to the absence of any action by the defendants in relation to the plaintiff's practising certificate between March 2000 and December 2007. It was submitted that the real precipitant of the second defendant's action in cancelling the certificate was the conviction and that this was subject to appeal with reasonable prospects of success. 26 I do not fully accept that submission. I agree, as I have set out in the bail judgment, that the appeal does have reasonable prospects of success. It seems to me, however, that the basis of the second defendant's cancellation is not so much the fact of the conviction but rather that the conviction involves a finding that the impugned conduct took place. 27 In relation to the protection of the public, this gives rise to a broader question. In the decisions involving legal professionals, the conduct which has given rise to the cancellation of a practising certificate has usually occurred over a period of time. In Cahill's case it was the falsification of mortgages over some years and in Stevens' case it was the abrogation of income tax responsibilities for in excess of 20 years. 28 The plaintiff's case is somewhat different. It involves a single incident. It is clear that the plaintiff and Mr Preston disliked each other intensely. There is an inference that the plaintiff's conduct was motivated not only by desire for monetary gain, but by his dislike for Mr Preston and his desire to win the point over him in the costs dispute. While those circumstances undoubtedly impact adversely on his fitness to practise as a solicitor, they do not necessarily indicate a man who is a danger to the public in the sense that he is likely to commit offences of dishonesty if he were allowed to continue in practice until the appeal is disposed of. 29 The final point submitted by the plaintiff was that the period of time during which the stay would operate would be short. The appeal will be heard in less than three months and consistent with the usual practice of the Court of Criminal Appeal a judgment can be expected not long afterwards. 30 On behalf of the defendants it was submitted that the protection of the public was paramount. Such protection should not be limited only to the clients of the firm but to the public at large and also to the legal profession. If the plaintiff, having been convicted and sentenced according to law, were allowed to retained his practising certificate this would bring the legal profession into disrepute generally and would lower its standing in the eyes of the public. The second defendant stressed the disgraceful nature of the conduct underlying the plaintiff's conviction. Reference was made to the specific findings by the sentencing judge. The offence involved a breach of trust, the creation of a false document to be used in court proceedings and deliberate malice to prejudice a client. It was submitted that those elements of his criminal behaviour went to the heart of a person's fitness to be a legal practitioner. 31 Those submissions have considerable force, particularly if this were a final hearing. Their force however is somewhat reduced when considered against this application which is for a stay for a limited and comparatively short period of time with a specific object, ie to protect the status quo and in particular the interests of the firm's clients pending the outcome of the appeal. 32 It was submitted that because I was not told about the sale agreement of 22 November in the bail application that this also constituted a matter which ought be taken into account and which ought reflect adversely on the plaintiff. It is true that I was told nothing about the sale agreement. I am not, however, prepared to draw an inference adverse to the plaintiff. There are a number of explanations for that which would not give rise to an adverse inference against the plaintiff. One also needs to have regard to the difficulties for a person in custody in conveying instructions to their legal advisers where that person is not sitting with them. 33 It was accepted by all the parties that the decision in this matter involves a balancing exercise. As was said by Spigelman CJ in Stevens' case "the overriding principle to apply when determining an application for a stay is to ask what the interests of justice require". I am of the opinion that the balance, insofar as a stay is concerned, favours the plaintiff. The stay will be for a comparatively brief period. I do not see the public being at risk if the applicant continues to practise. He has done so apparently without risk to the public between 2000 and the date when he was sentenced. There is a real risk that there may be no-one to run the firm, given the operation of s 17 and Mr Zwar's understandable reluctance to take any action pursuant to the sale agreement which might contravene that section. There is not only a risk but a likelihood that the clients of the firm will suffer even if Mr Zwar is prepared and able to conduct the firm's business without the assistance of the plaintiff. 34 I also have regard to the conditions which the plaintiff has proffered, ie that he will not provide legal services to persons who are not clients of the firm as of 27 November 2007 and he will not provide legal services to anyone to whom he has not disclosed his conviction. Taking those matters into account, I have concluded that the public interest is best served if a stay is granted. 35 In the plaintiff's proposed orders, he has sought that all questions of costs be reserved. I do not consider that this is an appropriate order. Given the facts underlying the plaintiff's conviction on 22 August 2007, the conduct of the defendants was appropriate and in accordance with their remit to protect members of the public and the legal profession. The plaintiff's application for a stay is an application that the Court grant a significant indulgence. In those circumstances, I am of the opinion that the plaintiff should pay the costs of this application.

(1) I grant leave to the plaintiff to file and serve the Amended Summons by 4 pm on 19 December 2007.

(2) I order that the Summons as amended be listed for direction on 19 March 2008, ie one week after the proposed hearing of the plaintiff's appeal.

(3) I note that the plaintiff undertakes to the Court that until his appeal against his conviction is finally decided, lapses or otherwise ends, or until further order of the Court: (a) He will not, without the leave of the Court or the prior written consent of the defendants, practise as an Australian legal practitioner otherwise than in the employ of Michael Zwar, the holder of a Practising Certificate issued by the second defendant; and (b) He will not without the leave of the Court or the prior written consent of the defendants, provide any legal services to any person: (i) Who was not on 27 November 2007 a client of the firm of solicitors and barristers known as MD Nikolaidis & Co; and (ii) To whom he has not disclosed his conviction of 22 August 2007, his sentence of 23 November 2007, the pendency of his appeal to the Court of Criminal Appeal and a copy of these order; and (c) He will, with all due expedition, comply with any reasonable direction given to him in writing by the defendants or either of them.

(4) Upon the plaintiff giving to the Court the undertakings noted in paragraph (3) of these orders, I order until further order, that: (a) Any cancellation of the plaintiff's Practising Certificate effected by resolution of the second defendant on 13 December 2007 (pursuant to s 61 of the Act); and (b) Any suspension of his Practising Certificate effected by resolution of the second defendant on 27 November 2007 (pursuant to s 548 of the Act)

be stayed (pursuant to s 62(3), 108 and 549 of the Act and the inherent power of the Court) until the plaintiff's appeal against conviction on 22 August 2007 of an offence under s 300(1) of the Crimes Act is finally decided, lapses or otherwise ends.

(5) Upon the plaintiff giving to the Court the undertakings noted in paragraph (3) of these orders I order until further order, that (pursuant to sections 108 and 549 of the Act and the inherent power of the Court) the plaintiff be permitted to hold (and the defendants take such steps as might be necessary on their part to enable him to hold) a practising certificate as a solicitor and barrister until his appeal against conviction on 22 August 2007 of an offence under s 300(1) of the Crimes Act 1900 is finally decided, lapses or otherwise ends.

(6) I note that, for the purposes of ascertaining whether he has the prior written consent of the defendants within the meaning of the undertakings recorded in order (3), the plaintiff may act upon a letter written by the Commissioner or an officer working in the office of the Commissioner (in the case of the first defendant) or a solicitor and barrister retained or employed by the Law Society of NSW (in the case of the second defendant).

(8) The plaintiff is to pay the defendants' costs of this application. **********

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At a glance

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Judgment (28 paragraphs)

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Legislation Cited (1)

Cases Cited (4)